Does anyone know if replying to an existing discussion counts as "new content" so it would fall under a Contributing User or would it not be new unless it was a new discussion altogether making replies count towards Participating Users? I assume the latter since comments are treated that way but was hoping someone knew for sure.

Participating Users

Users who have commented, liked, rated/voted, edited, or created content in the previous 30 days.

Your understanding is correct. Responding to something does not make you a Contributing user, only Participating. You need to do something like start a discussion, ask a question, or post a document to be a Contributor.

It bears repeating the conceptual framework behind this: increasing levels of personal risk. The more you are take a personal risk, the more engaged you are in the community.

Of course, it does sometimes happen that a user puts something really substantial in a response/comment. But even this never happens unless someone is willing to start the discussion in the first place so we reserve Contributing status for people who do that.